FORM 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ending September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-26380
_______________________________________________
PIXTECH, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-3214691
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Avenue Olivier Perroy, 13790 Rousset, France
2700 Augustine Drive, Suite 255, Santa Clara, CA 95054
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(Address of principal executive offices) (Zip code)
011-33-4-42-29-10-00
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
- -
The number of shares outstanding of each of the issuer's classes of Common Stock
as of
Class Outstanding at November 10, 2000
----- --------------------------------
Common Stock, $.01 par value 55,249,857
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<CAPTION>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
PIXTECH, INC.
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TABLE OF CONTENTS
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PAGE NO.
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<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2000
and December 31, 1999. . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Comprehensive Operations
for the Three-Month Ending September 30, 2000 and 1999, for the
Nine-Month Ending September 30, 2000 and 1999, and the period
from June 18, 1992 (date of inception) through September 30, 2000. 4
Condensed Consolidated Statements of Cash Flows for the Nine-
Month ending September 30, 2000 and 1999, and the period from
June 18, 1992 (date of inception) through September 30, 2000. . . 5
Condensed Consolidated Statements of Stockholders' Equity. . . . . 6
Notes to Condensed Consolidated Financial Statements. . . . . . 7 - 10
Management's Discussion and Analysis of Financial Condition and
ITEM 2 Results of Operations. . . . . . . . . . . . . . . . . . . . . 11 - 14
ITEM 3 Quantitative and Qualitative Disclosures Regarding Market Risk. . 14
PART II OTHER INFORMATION
ITEM 2 Changes in Securities. . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 16
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
2
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<CAPTION>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SEPTEMBER DECEMBER
30, 31,
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets :
Cash and cash equivalents available. . . . . . . . . . . . . . . . $ 21,331 $ 14,663
Restricted cash - short term . . . . . . . . . . . . . . . . . . . 833 1,667
Accounts receivable:
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 57
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 709
Inventories :
Raw Materials . . . . . . . . . . . . . . . . . . . . . . . . 1,079 1,109
Finished Goods . . . . . . . . . . . . . . . . . . . . . . . . 105 --
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 651
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . 24,383 18,856
Restricted cash - long term . . . . . . . . . . . . . . . . . . . . . 625 5,833
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . 19,933 24,933
Goodwill, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 78
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,255
Other assets - long term . . . . . . . . . . . . . . . . . . . . . . . 46 214
----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 45,011 $ 51,169
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities :
Current portion of long term debt . . . . . . . . . . . . . . . . . $ 1,290 $ 8,128
Current portion of capital lease obligations. . . . . . . . . . . . 246 2,455
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 6,961 7,548
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 2,286 2,135
----------- -----------
Total current liabilities 10,783 20,266
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 546 248
Long term debt, less current portion . . . . . . . . . . . . . . . . . 2,790 3,075
Capital lease obligation, less current portion . . . . . . . . . . . . 5,669 7,644
Other long term liabilities, less current portion. . . . . . . . . . . 35 52
----------- -----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . 19,823 31,285
=========== ===========
STOCKHOLDERS' EQUITY
Convertible preferred stock Series E, $0.01 par value, authorized
shares-1,000,000 ; issued and outstanding shares-22,095 and 297,269
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3
Common Stock, $0.01 par value, authorized shares-100,000,000
and 60,000,000 respectively; issued and outstanding shares-55,249,857
and 37,351,283 respectively . . . . . . . . . . . . . . . . . . . . . 552 373
Additional paid-in capital .. . . . . . . . . . . . . . . . . . . 131,511 105,081
Cumulative other comprehensive income . . . . . . . . . . . . . . (4,112) (2,988)
Deficit accumulated during development stage .. . . . . . . . . . (102,764) (82,585)
----------- -----------
Total stockholders' equity .. . . . . . . . . . . . . . . . . 25,188 19,884
----------- -----------
Total liabilities and stockholders' equity .. . . . . . . . . $ 45,011 $ 51,169
=========== ===========
</TABLE>
See accompanying notes.
3
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<CAPTION>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
--------------------- ------------------- Period from
--------------------- ------------------- June 18, 1992
Three Months Nine Months (date of
-------------------- -------------------- inception)
Ending September 30, Ending September 30, through
-------------------- -------------------- September 30,
2000 1999 2000 1999 2000
-------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Cooperation and license revenues $ -- $ -- $ -- $ -- $ 26,449
Product sales . . . . . . . . . . -- 71 217 410 3,527
Other revenues. . . . . . . . . . 854 877 4,767 3,191 15,581
-------- -------- --------- --------- ----------
Total revenues . . . . . . . . 854 948 4,984 3,601 45,557
-------- -------- --------- --------- ----------
Cost of revenues
License fees and royalties. . . . (73) (82) (255) (254) (2,132)
-------- -------- --------- --------- ----------
Gross margin . . . . . . . . . . . . 781 866 4,729 3,347 43,425
-------- -------- --------- --------- ----------
Operating expenses
Research and development:
Acquisition of intellectual property
rights. . . . . . . . . . . . . . . -- -- (57) -- (5,022)
Other . . . . . . . . . . . . . . . (7,013) (7,210) (22,727) (19,413) (122,436)
-------- -------- --------- --------- ----------
(7,013) (7,210) (22,784) (19,413) (127,458)
Marketing and sales . . . . . . . . (269) (338) (840) (1,018) (8,726)
Administrative and general
expenses. . . . . . . . . . . . . . (645) (787) (2,142) (2,289) (17,941)
-------- -------- --------- --------- ----------
(7,928) (8,335) (25,767) (22,720) (154,126)
-------- -------- --------- --------- ----------
Loss from operations . . . . . . . . . (7,147) (7,469) (21,038) (19,373) (110,701)
Other income / (expense)
Interest income . . . . . . . . . . 389 203 1,001 674 4,649
Interest expense. . . . . . . . . . (101) (447) (544) (1,282) (4,955)
Foreign exchange (losses) / gains . (5) 112 327 (1,025) 277
Other revenues / (expenses) . . . . 57 -- 74 -- 74
-------- -------- --------- --------- ----------
340 (132) 858 (1,633) 45
Loss before income tax benefit . . . . (6,807) (7,601) (20,180) (21,006) (110,656)
Income tax benefit . . . . . . . . . . -- -- -- -- 7,893
-------- -------- --------- --------- ----------
Net loss . . . . . . . . . . . . . . . $(6,807) $(7,601) $(20,180) $(21,006) $(102,763)
======== ======== ========= ========= ==========
Dividends accrued to holders of
-------- -------- --------- --------- ----------
Preferred Stock . . . . . . . . . . (9) (78) (106) (377) (631)
-------- -------- --------- --------- ----------
Net loss to holders of Common Stock. . $(6,816) $(7,679) $(20,286) $(21,383) $(103,394)
======== ======== ========= ========= ==========
Net loss per share of Common
Stock . . . . . . . . . . . . . . . $ (0.12) $ (0.32) $ (0.41) $ (1.10)
======== ======== ========= =========
Shares of Common Stock used in
computing net loss per share. . . . 54,922 23,408 49,089 19,037
Net loss . . . . . . . . . . . . . $(6,807) $(7,601) $(20,180) $(21,006) $(102,763)
Change in other comprehensive . . . (308) (129) (1,123) (916) (4,112)
-------- -------- --------- --------- ----------
income . . . . . . . . . . . . . .
Comprehensive net loss. . . . . . . $(7,115) $(7,730) $(21,303) $(21,922) $(106,875)
======== ======== ========= ========= ==========
See accompanying notes.
</TABLE>
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PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Period from
June 18, 1992
(date of
NINE MONTHS ENDING inception)
SEPTEMBER 30, through
September 30,
-------------------- ----------
2000 1999 2000
--------- --------- ----------
<S> <C> <C> <C>
Net loss $(20,180) $(21,006) $(102,763)
Total adjustments to net loss. . . . . . . . . . . . . . . . . . 10,287 9,300 42,915
--------- --------- ----------
Net cash used in operating activities. . . . . . . . . . . . . . (9,893) (11,706) (59,848)
--------- --------- ----------
INVESTING ACTIVITIES
Additions to property, plant, and equipment. . . . . . . . . . . (1,862) (625) (22,417)
Reclassification of restricted cash as cash available. . . . . . 6,041 1,299 (1,607)
Additions to intangible assets . . . . . . . . . . . . . . . . . -- -- (130)
--------- --------- ----------
Net cash provided by / (used in) investing activities . . . . . 4,179 674 (24,154)
FINANCING ACTIVITIES
Stock issued . . . . . . . . . . . . . . . . . . . . . . . . . . 19,238 4,179 111,847
Proceeds from long-term borrowings . . . . . . . . . . . . . . . 248 -- 18,549
Proceeds from sale leaseback transactions. . . . . . . . . . . . -- -- 2,731
Payments for equipment purchases financed by accounts payable. . -- -- (3,706)
Repayments of long term borrowing and capital lease obligations (4,803) (1,481) (18,646)
--------- --------- ----------
Net cash provided by financing activities. . . . . . . . . . . . 14,683 2,698 110,775
--------- --------- ----------
Effect of exchange rates on cash . . . . . . . . . . . . . . . . (2,301) 563 (5,443)
--------- --------- ----------
Net increase / (decrease) in cash and cash equivalents . . . . . 6,668 (7,771) 21,331
Cash and cash equivalents beginning of period . . . . . . . . . 14,663 10,166 --
--------- --------- ----------
Cash and cash equivalents end of period. . . . . . . . . . . . . $ 21,331 $ 2,395 $ 21,331
========= ========= ==========
</TABLE>
See accompanying notes.
5
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PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Series E Common Stock
-------- -----------------
Dividends
------------
accrued to
------------
Additional holders of
------------ ------------
Shares Shares Paid-in Preferred
--------- ---------- ------------ ------------
Issued Amount Issued Amount Capital Stock
--------- -------- ---------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 8,141,146 $ 81 $ 34,085
Common Stock issued in public offering, net of
issuance costs -- $796 . . . . . . . . . . . . . . . . 5,570,819 56 22,958
Issuance of Common Stock under stock option plan 50,767 1 25
Translation adjustment . . . . . . . . . . . . . . . .
Net loss-Year ending Dec. 31, 1997 . . . . . . . . . .
BALANCE AT DECEMBER 31, 1997 . . . . . . . . . . . . . . 13,762,732 $ 138 $ 57,067
Common Stock issued in private placements,
net of issuance costs -- $44 . . . . . . . . . . . . . 1,236,222 12 4,493
Issuance of Series E convertible preferred stock,
net of issuance costs -- $822. . . . . . . . . . . . . . 367,269 4 7,449 (12)
Issuance of Common Stock under stock option plan 1,375 1
Translation adjustment . . . . . . . . . . . . . . . .
Net loss-Year ending Dec. 31, 1998 . . . . . . . . . .
BALANCE AT DECEMBER 31, 1998 . . . . . . . . . . . . . . 367,269 $ 4 15,000,329 151 69,012 (12)
Common Stock issued in private placements . . . . . . 150,000 1 350
Issuance costs and dividends accrued in relation
to Series E convertible preferred stock
issued in December 1998 . . . . . . . . . . . . . . . . (36) (512)
Conversion of Series E preferred stock . . . . . . . . (70,000) (1) 1,114,220 11 (10)
Issuance of Common Stock in connection with the
acquisition of certain assets of Micron Display, net
of issuance costs -- $511 . . . . . . . . . . . . . . . 7,133,562 71 14,134
Issuance of warrants . . . . . . . . . . . . . . . . 297
Issuance of Common Stock following conversion
of Sumitomo convertible loan . . . . . . . . . . . . . 750,000 7 1,081
Issuance of Common Stock under stock option plan . . 137,217 1 72
Issuance of Common Stock in connection with Equity
Line Kings-bridge, net of issuance costs -- $176 . . 624,809 6 818
Issuance of Common Stock in connection with private
placement, net of issuance costs -- $36 . . . . . . . . 12,427,146 124 19,839
Issuance of Common Stock in connection with Coloray . 14,000 1 50
Translation adjustment . . . . . . . . . . . . . . . .
Net loss-Year ending Dec. 31, 1999 . . . . . . . . . .
BALANCE AT DECEMBER 31, 1999 . . . . . . . . . . . . . . 297,269 $ 3 37,351,283 $ 373 $ 105,606 $ (525)
Dividends accrued in relation to Series E convertible
preferred stock issued in December 1998 (unaudited) . . (91)
Conversion of Series E preferred stock (unaudited) . . (275,174) (3) 4,195,254 42 (38) 552
Issuance of Common Stock following conversion of
Sumitomo convertible loan (unaudited). . . . . . . . . . 2,126,246 21 3,890
Issuance of Common Stock following conversion of
Sumitomo straight loan (unaudited) . . . . . . . . . . 385,549 4 2,496
Issuance of Common Stock in connection with
Kingsbridge Equity Line, net of issuance Costs
-- $179 (unaudited)) . . . . . . . . . . . . . . . . 1,572,261 16 4,305
Issuance of Common Stock in connection with
Coloray (unaudited) . . . . . . . . . . . . . . . . 16,000 0 57
Issuance of Common Stock in connection with
private placement, net of issuance costs -- $50
(unaudited) . . . . . . . . . . . . . . . . . . . . 9,320,359 93 14,894
Issuance of Common Stock under stock option
plan (unaudited) . . . . . . . . . . . . . . . . . . 282,905 3 365
Translation adjustment (unaudited) . . . . . . . . .
Net loss-Nine Months ending September 30, 2000
(unaudited) . . . . . . . . . . . . . . . . . . . . . .
BALANCE AT SEPTEMBER 30, 2000 (UNAUDITED) . . . . . . . 22,095 $ 1 55,249,857 $ 552 $ 131,575 $ (64)
-------------------------------------------------------- ========= ======== ========== ======= ============ ============
Deficit
-------
Other accumu-
--------- -------
Compre- lated during
--------- ------------
Hensive develop
--------- -------
Income ment stage Total
--------- -------------- ---------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 . . . . . . . . . . . . . . $ (438) $ (21,629) $ 12,099
Common Stock issued in public offering, net of
issuance costs -- $796 . . . . . . . . . . . . . . . . 23,014
Issuance of Common Stock under stock option plan . . . 25
Translation adjustment . . . . . . . . . . . . . . . . (1,694) (1,694)
Net loss-Year ending Dec. 31, 1997 . . . . . . . . . (14,664) (14,664)
BALANCE AT DECEMBER 31, 1997 . . . . . . . . . . . . . . (2,132) (36,293) 18,780
Common Stock issued in private placements,
net of issuance costs -- $44 . . . . . . . . . . . . . 4,506
Issuance of Series E convertible preferred stock,
net of issuance costs -- $822 . . . . . . . . . . . . . 7,440
Issuance of Common Stock under stock option plan . . . 1
Translation adjustment . . . . . . . . . . . . . . . . 392 392
Net loss-Year ending Dec. 31, 1998 . . . . . . . . . . (17,863) (17,863)
BALANCE AT DECEMBER 31, 1998 . . . . . . . . . . . . . . (1,740) (54,156) 13,257
Common Stock issued in private placements . . . . . . . 352
Issuance costs and dividends accrued in relation
to Series E convertible preferred stock
issued in December 1998 . . . . . . . . . . . . . . . . . (548)
Conversion of Series E preferred stock
Issuance of Common Stock in connection with the
acquisition of certain assets of Micron Display, net
of issuance costs -- $511 . . . . . . . . . . . . . . . . 14,205
Issuance of warrants . . . . . . . . . . . . . . . . . 297
Issuance of Common Stock following conversion
of Sumitomo convertible loan . . . . . . . . . . . . . 1,088
Issuance of Common Stock under stock option plan . . . 73
Issuance of Common Stock in connection with Equity
Line Kings-bridge, net of issuance costs -- $176 . . 824
Issuance of Common Stock in connection with private
placement, net of issuance costs -- $36 . . . . . . . 19,963
Issuance of Common Stock in connection with Coloray . 51
Translation adjustment . . . . . . . . . . . . . . . . (1,249) (1,249)
Net loss-Year ending Dec. 31, 1999 . . . . . . . . . . (28,428) (28,428)
BALANCE AT DECEMBER 31, 1999 . . . . . . . . . . . . . . $ (2,989) $ (82,584) $ 19,884
Dividends accrued in relation to Series E convertible
preferred stock issued in December 1998 (unaudited) . . (91)
Conversion of Series E preferred stock (unaudited). . 553
Issuance of Common Stock following conversion of
Sumitomo convertible loan (unaudited) . . . . . . . . . 3,911
Issuance of Common Stock following conversion of
Sumitomo straight loan (unaudited) . . . . . . . . . . 2,500
Issuance of Common Stock in connection with
Kingsbridge Equity Line, net of issuance Costs
-- $179 (unaudited)) . . . . . . . . . . . . . . . . . 4,321
Issuance of Common Stock in connection with
Coloray (unaudited) . . . . . . . . . . . . . . . . . . 57
Issuance of Common Stock in connection with
private placement, net of issuance costs -- $50
(unaudited) . . . . . . . . . . . . . . . . . . . . . . 14,987
Issuance of Common Stock under stock option
plan (unaudited) . . . . . . . . . . . . . . . . . . . . 368
Translation adjustment (unaudited) . . . . . . . . . . (1,123) (1,123)
Net loss-Nine Months ending September 30, 2000
( unaudited) (20,180) (20,180)
BALANCE AT SEPTEMBER 30, 2000 (UNAUDITED) . . . . . . . $ (4,112) $ (102,764) $ 25,188
-------------------------------------------------------- ========= ============== =========
</TABLE>
See accompanying notes
6
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PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
NOTE A - BASIS OF PRESENTATION
The financial information as of September 30, 2000, and for the three-month and
nine-month periods ending September 30, 2000 and 1999 is unaudited but includes
all adjustments, which are of a normal recurring nature and, in the opinion of
management, necessary for a fair presentation of the financial position and
results of operations for the presented periods. The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
Operating results of the three-month and nine-month periods ending September 30,
2000 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto for the year ending
December 31, 1999 included in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 28, 2000.
NOTE B - RESTRICTED CASH
In August 1997, we provided Unipac Optoelectronics Corp. ("Unipac"), our Asian
manufacturing partner, with a written bank guaranty in the amount of $10,000
pursuant to the display foundry agreement (the "Foundry Agreement") signed in
May 1997 between Unipac and us in order to implement volume production of field
emission displays at Unipac's manufacturing facility. We granted the issuing
banks a security interest in cash and cash equivalents for the same amount. The
pledged cash and cash equivalents have been recorded as short-term and long-term
restricted cash on the balance sheet.
In March 2000, pursuant to an agreement dated December 17, 1999 signed with
Unipac, the guaranty was reduced by $5,000 in consideration of a payment in cash
of the same amount to Unipac. Pursuant to the terms of this agreement, this
$5,000 payment will be considered as a prepayment against our future payments to
Unipac concerning the equipment leased by Unipac to us. Consequently, the amount
of the security interest to the banks was reduced to $1,458 at September 30,
2000 (see Note D - Capital Leases).
NOTE C - PROPERTY, PLANT AND EQUIPMENT
Pursuant to the Foundry Agreement, volume FED production equipment was installed
at Unipac's facility. That equipment was purchased and funded by Unipac, and a
portion of it is leased to us. This portion amounted to $9,991 at September 30,
2000. According to Financial Accounting Standard 13, "Accounting for Leases",
this equipment was recorded as assets under the caption "Property, Plant and
Equipment" in the net amount of $6,418 at September 30, 2000. Depreciation of
$1,314 was recorded during the nine-month period ending September 30, 2000. As
of September 30, 2000, the related capital lease obligation amounted to $5,431,
all recorded as long term portion.
NOTE D - CAPITAL LEASES
We are party to certain sale-leaseback transactions for equipment used in our
pilot production plant in Montpellier and, pursuant to the Foundry Agreement, a
portion of volume field emission displays production equipment installed at
Unipac's facility is leased to us. According to Financial Accounting Standard
13, "Accounting for Leases", a capital lease obligation was recorded in 1998.
During the nine-month period ending September 30, 2000, the related capital
lease obligation was reduced by $5,000 following the prepayment of the same
amount made in cash to Unipac and amounted to $5,431 at September 30, 2000 (See
Note B-Restricted Cash and Note C-Property, Plant and Equipment).
7
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
Future minimum payments under capital lease obligations at September 30, 2000
are as follow:
YEARS ENDING DECEMBER 31,
2000 . . . . . . . . . . . . . . . . . . . . . . . . . $ 151
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 544
2002 . . . . . . . . . . . . . . . . . . . . . . . . . 308
2003 . . . . . . . . . . . . . . . . . . . . . . . . . 3,320
2004 . . . . . . . . . . . . . . . . . . . . . . . . . 2,273
-------
Total minimum payments . . . . . . . . . . . . . . . . 6,596
Less amount representing interest. . . . . . . . . . . (681)
-------
Present value of minimum capitalized lease payments . $5,915
-------
NOTE E - LONG TERM DEBT
During the nine-month period ending September 30, 2000, long term debt was
reduced by $7,123. The reduction was mainly due to the conversion of long term
debt into shares of our Common Stock. The shares were converted from a
convertible note and another note issued to Sumitomo Corporation in 1997. The
principal amounts due under these notes on December 31, 1999 were $3,912 and
$2,500, respectively (See Note F-Stockholders' equity).
Long-term debt consists of certain loans payable under which future minimum
payments, at September 30, 2000, are as follows:
YEARS ENDING DECEMBER 31,
2000 . . . . . . . . . . . . . . . . . . . . $291
2001 . . . . . . . . . . . . . . . . . . . . 999
2002 . . . . . . . . . . . . . . . . . . . . 1,060
2003 . . . . . . . . . . . . . . . . . . . . 174
2004 . . . . . . . . . . . . . . . . . . . . 254
2005 . . . . . . . . . . . . . . . . . . . . 1,302
------
Total minimum payments . . . . . . . . . . . $4,080
======
NOTE F - STOCKHOLDERS' EQUITY
Common Stock:
In January and February 2000, we issued an aggregate of 2,126,246 shares of our
Common Stock to Sumitomo Corporation upon the conversion in full of $3,912 then
outstanding under a $5,000 convertible note issued in 1997. This note, with a
principal due of $3,912 at December 31, 1999, was convertible at Sumitomo
Corporation's option into shares of our Common Stock at a conversion price equal
to 80% of the market price of the Common Stock at the conversion date.
In March 2000, we converted the entire outstanding amount of a loan by Sumitomo
Corporation previously payable in two settlements of $1,250 each in May 2000 and
November 2000 through the issuance of 385,549 shares of our Common Stock at a
price of $6.48 per share of Common Stock, for an aggregate consideration of
$2,500.
In March 2000, in connection with an agreement signed with Coloray Display
Corporation, we issued 16,000 shares of our Common Stock, valued at a price of
$3.57 per share, representing a total amount of $57 in consideration for the
transfer to us of the rights and obligations of Micron Technology, Inc. under
the license agreement dated as of April 8, 1992 between Coloray Display
Corporation and Micron Technology, Inc.
8
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
In August 9, 1999, we secured a $15,000 equity-based line of credit with
Kingsbridge Capital Ltd. Under the terms of the equity line, we can draw up to
$15,000 cash in exchange for our Common Stock, in increments over a two-years
period. The decision to draw on any of the funds and the timing and account of
any such draw are at our sole discretion, subject to certain conditions. Such
conditions include limitations depending on the volume and the market price of
our Common Stock. During the nine-month ending September 30, 2000, we issued
1,572,261 shares of Common Stock, in exchange for $4,321 ($4,500, less issuance
costs of $179). Through September 30, 2000, out of the maximum amount of
$15,000, we have drawn a total amount of $5,500.
In April 2000, pursuant to an amendment signed in February 2000 to the Common
Stock Purchase Agreement dated October 6, 1999 with Unipac, we received $15,000
upon the completion of an equity private placement to United Microelectronics
Corporation, approved by the stockholders during a special meeting held on
January 18, 2000. In consideration for this investment, United Microelectronics
Corporation received 9,320,359 shares at a purchase price of $1.6094 per share
of Common Stock.
Convertible Preferred Stock:
In the nine-month period ending September 30, 2000, we issued an aggregate of
4,195,254 shares of Common Stock upon the conversion of an aggregate of 275,174
shares of Series E Preferred Stock at an average conversion price of $1.60938.
In September 30, 2000, there were 22,095 shares of Series E Preferred Stock
outstanding. These shares of Series E Preferred Stock were convertible into
shares of Common Stock using a conversion price equal to the lesser of
approximately $1.60938 per share of Common Stock or the average closing price of
our Common Stock over the ten trading days immediately preceding the notice of
conversion.
The holders of Series E Preferred Stock are entitled to cumulative dividends. In
September 30, 2000 a dividend of $64 was accrued and recorded against
stockholders' equity.
In addition, we are required to reserve, out of the authorized but unissued
shares, 150% of the number of shares of Common Stock that the Series E Stock are
convertible into. As of September 30, 2000, the Series E Stock would have been
convertible into 349,366 shares of Common Stock, thus requiring us to reserve
524,049 shares of the remaining authorized but unissued shares.
NOTE G - LITIGATION
We have received correspondence from Futaba Corporation and its legal counsel in
January 1998 alleging the following; (i) PixTech is infringing one or more
patents owned by Futaba relating to the construction and manufacture of its
displays that are not expressly included under the license agreement between
Futaba and PixTech, (ii) PixTech's use of terms such as "alliance" and
"partners" in describing the nature of its contractual relationships with
Motorola, Raytheon and Futaba in reports filed with the SEC is misleading and
(iii) certain provisions in the Foundry Agreement with Unipac constitute an
impermissible sublicense of Futaba technology. Futaba has also claimed that we
improperly supplied certain Futaba proprietary information to Unipac, and that
Unipac has in turn disclosed such information to a third party vendor. We have
accepted an offer of settlement from Futaba, reflected in correspondence dated
December 15, 1999 and December 30, 1999, pursuant to which Futaba has waived
these claims against us. We are currently preparing a definitive written
settlement agreement with Futaba.
NOTE H- FINANCIAL POSITION
During the nine-month period ending September 30, 2000, we have continued to
experience losses and have used cash in operating activities of $9,893. As of
September 30, 2000, we had a net working deficit of $8,564 and a deficit
accumulated during development stage of $102,763. During the nine-month period
ending September 30, 2000, we reduced both (i) our long term debt by $6,775,
with the conversion of the Sumitomo Corporation notes issued in 1997 into shares
of our Common Stock, and (ii) our capital lease obligation mainly in connection
with the prepayment of $5,000 made to Unipac out of our restricted cash. We also
received $4,321 from the Kingsbridge equity line.
9
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTE I-SIGNIFICANT CONTRACT
On April 3, 2000, we announced that we have been awarded a development contract
by DARPA (Defense Advanced Research Projects Agency). Under the terms of the
contract, PixTech will receive approximately $6.3 million for the development
and demonstration of a full color, full video rate, 12.1-inch Field Emission
Display. After delivery the displays will undergo testing and evaluation for use
in U.S. military vehicles.
This funding is in addition to and a continuation of the existing DARPA
contract, which was transferred from Micron Technology, Inc. to PixTech in
August of 1999 awarded for $4.7 million.
10
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Management Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements reflecting management's current
expectation regarding our future financial performance. Such expectations are
based on certain assumptions and involve risks and uncertainties. These
uncertainties include, but are not limited to, the risk associated with
transitioning to high volume manufacturing of field emission display at Unipac,
product demand and market acceptance risks, the commitment of Unipac and/or of
our licensees, our ability to grant other licenses under field emission display
technology, the validity and enforceability of our patent rights, possible
infringement by us of patent rights of others, the impact of competitive
products and prices, product development risks, commercialization or
technological delays or difficulties, trade risks, legal risks, and social and
economic risks. See also "Important Factors Regarding Future Results" described
more fully in Exhibit 99.1 to our Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on May 15, 2000.
RESULTS OF OPERATIONS
Product Sales
We recognized product sales of $217,000 in the nine-month period ending
September 30, 2000, as compared to $410,000 in the nine-month period ending
September 30, 1999. During the third quarter of 2000, we had no revenues as
compared to $71,000 during the same period last year. In the nine-month periods
ending September 30, 1999 and 2000, product revenues primarily consisted of
shipments of displays sold at volume prices to Zoll Medical. Since the last
quarter of 1998, we have begun shipping our field emission displays manufactured
by our contract manufacturer, Unipac, to our customers in limited quantities.
During the three-month period ending September 30, 2000 75% of units shipped to
our customers have been manufactured in Taiwan, as compared to 7% during the
three-month period ending September 30, 1999. At September 30, 2000, 435
displays were ready for sale and included in finished goods inventory on the
balance sheet.
Other Revenues
Other revenues consist of funding under various public development
contracts and other miscellaneous revenues. We recognized other revenues of
$854,000 and $4,767,000 for the three and nine-month periods ending September
30, 2000, respectively, as compared to $877,000 and $3,191,000 in the same
periods of 1999. Of these revenues, in the nine-month period ending September
30, 2000, $4,713,000 was related to a development contract awarded to us by
DARPA (Defense Advanced Research Projects Agency) in August 1999. Under the
terms of this DARPA contract, we recognized and received a total amount of $4.7
million, which represented the entire amount of this DARPA contract. In April
2000, we began development efforts on a 12.1 inch color field emission display
under the same DARPA contract of which we have received $2,664,000 in September
30, 2000. We announced the successful delivery of the 12.1 inch full color
field emission displays to U.S. Army on August 14, 2000. The remaining DARPA
funding as of September 30, 2000 that we are entitled to receive is
approximately $3.6 million, payable.
Other Research and Development Expenses
We have spent $7.0 million and $22.7 million for research and development
during the three and the nine-month periods ending September 30, 2000
respectively as compared to $7.2 million and $19.4 million in the same periods
of 1999. The decrease for the three-month period is related to a credit note
issued by Unipac to cover the interruptions in the production flow during the
first quarter 2000, and the favorable impact of the exchange rate between U.S.
dollar and Euro (approximately $133,000). However, the increase for the
nine-month period ending September 30, 2000 includes salaries and associated
expenses for in-house research and development activities conducted both in our
pilot plant and our research and development facility in Boise, Idaho. Research
and development expenses include also the cost of staffing and operating our
pilot manufacturing facility and the cost of supporting the transfer and
adaptation of our field emission displays technology to Unipac. Obligations to
Commissariat l'Energie Atomique under the LETI Research Agreement dated
September 17, 1992 are also part of these expenses as well as miscellaneous
consulting contracts fees.
11
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
Sales and Marketing Expenses
Sales and marketing expenses decreased 21% from $338,000 in the three-month
period ending September 30, 1999 to $269,000 in the three-month period ending
September 30, 2000. We spent $840,000 for sales and marketing during the
nine-month period ending September 30, 2000, compared to $1,018,000 during the
same period last year. This variation in sales and marketing expenses reflects
a change in the reallocation of expenses to sales and marketing from other
departments. However, we believe sales and marketing expenses may increase in
the future, reflecting the expansion of our sales and marketing organization
both in the United States and in Europe.
General and Administrative Expenses
We spent $645,000 and $2,100,000 in general and administrative during the
three and nine-month periods ending September 30, 2000, respectively, compared
to $787,000 and $2.200,000 during the same periods in 1999. This decrease was
attributable to a reduction in legal fees, consulting fees and other
miscellaneous expenses from the previous year.
Interest Income (Expense), Net
Interest income is comprised of interest on available and restricted cash.
Interest expense is comprised of interest payable on long-term obligations. Net
interest income was $288,000 in the three-month period ending September 30, 2000
and $457,000 in the nine-month period ending September 30, 2000, compared to a
net interest expense of $244,000 and $608,000 in the same periods of 1999,
reflecting the decrease in long-term liabilities, the increase in cash available
and improved cash management for short term investments on the money market.
Currency Fluctuations
Although a significant portion of our revenues are denominated in U.S.
dollars, a substantial portion of our operating expenses are denominated in
Euros. Gains and losses on the conversion to U.S. dollars of assets and
liabilities denominated in Euros may contribute to fluctuations in our results
of operations, which are reported in U.S. dollars. Most of our capital lease
obligations are expressed in Taiwanese dollars. In the past, fluctuations of
the parity of the Taiwanese dollar versus the Euro caused significant foreign
exchange gains or losses and may continue to do so in the future. We recorded a
net foreign exchange loss of $5,000 in the third quarter of 2000 and a gain of
$327,000 in the nine-month period ending September 30, 2000, compared to a net
foreign exchange gain of $112,000 and a loss of $1,025,000 during the same
periods last year. We cannot predict the effect of exchange rate fluctuations
on future operating results. To date, we have not undertaken hedging
transactions to cover our currency exposure, but we may do so in the future.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operations was $9.8 million during the nine-month period ending
September 30, 2000, compared to $11.7 million in the nine-month period ending
September 30, 1999. This decrease is primarily a result of significant revenues
received from DARPA (Defense Advanced Research Projects Agency), from French
Public Agency and from French Authorities during this period.
We have used $59.8 million in cash to fund our operations since inception
through September 30, 2000 and have incurred $24.1 million in capital
expenditures and investments.
Capital expenditures were $1,862,000 during the nine-month period ending
September 30, 2000, compared to $625,000 during the same period in 1999. These
capital expenditures exclude assets acquired under capital lease obligations.
During the nine-month period ending September 30, 2000, capital expenditures
have remained focused on capacity expansion in the Boise, Idaho manufacturing
facility. Implementing volume production at Unipac's manufacturing plant
required significant capital expenditure. Pursuant to the Foundry Agreement,
Unipac funded $14.7 million in capital expenditures for equipment. A portion of
that equipment is leased to us and the gross amount of this equipment is $10
million as of September 30, 2000. We expect that additional capital expenditures
will be required by the end of 2000 and in 2001, and that we will increase
capacity at Unipac and complete implementation of manufacturing processes, for
both monochrome and color products.
12
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
During the nine-month period ending September 30, 2000, restricted cash was
reclassified as cash available in the amount of $6.0 million. Restricted cash
was related to the security interest corresponding to the guaranty granted to
Unipac in connection with the purchase and funding by Unipac of volume field
emission displays production equipment. In March 2000, pursuant to an agreement
dated December 17, 1999 signed with Unipac, the guaranty was reduced by $5.0
million in consideration of a payment in cash of the same amount to Unipac.
Pursuant to the terms of this agreement, this $5.0 million payment will be
considered as a prepayment against our future payments to Unipac concerning the
equipment leased by Unipac to us. Consequently, the amount of the security
interest to the banks was reduced by the same amount and amounted to $1,458,000
in September 30, 2000.
Cash generated by financing activities were $14.6 million in the nine-month
period ending September 30, 2000, compared to $2.6 million generated in the
nine-month period ending September 30, 1999. This net cash in the nine-month
period ending September 30, 2000 consisted of sales of shares of Common Stock,
resulting in net proceeds of $19.2 million, while repayment of long term
liabilities amounted to $4.8 million, including the $5.0 million prepayment made
to Unipac. Cash generated from financing activities in the nine-month period
ending September 30, 2000 excluded non-cash transactions related to (i) the
conversion into shares of our Common Stock of the convertible loan with Sumitomo
Corporation in the amount of $3.9 million and (ii) the conversion into shares of
our Common Stock of the loan with Sumitomo Corporation in the amount of $2.5
million, both resulting in a decrease of our long term liabilities. Cash
generated from financing activities included (i) the sales of shares of Common
Stock under the Kingsbridge equity line, resulting in net proceeds of $4.3
million, (ii) the sale of shares of Common Stock to Unipac, in April 2000,
resulting in net proceeds of $15.0 million and (iii) the exercise of options
under the 1993 stock option plan, resulting in net proceeds of $368,000, but
excluded non-cash transactions related to the conversion of 275,174 Series E
Convertible Preferred Stock in March and April 2000.
Since our inception, we have funded our operations and capital expenditure
primarily from the proceeds of equity financing aggregating $111.8 million and
from proceeds million from borrowings and sale-leaseback transaction aggregating
$21.2.
In 1997 and January 1999, we entered into two research and development
agreements with French authorities. Under these agreements, we expect to benefit
from zero-interest loans totaling approximately $3.0 million, of which we
received $482,000 in April, 2000 and $2.0 million in 1999.
In November 1998, we entered into a research and development agreement with
French authorities. Under this agreement, we expect to receive a total grant of
approximately $679,000, of which we received $196,000 in 1999 and $367,000 in
the nine-month period ending September 30, 2000. The $196,000 and $367,000
collected in 1999 and in the nine-month period ending September 30, 2000,
respectively, were not recognized as income as all conditions stipulated in the
agreement were not met.
On August 5, 1999, we were awarded a development contract by DARPA. Under
the terms of the contract, we received approximately $4.7 million to develop a
color field emission display of which $3.9 million were received during 2000 and
recognized as income. On April 3, 2000, a new contract, as a continuation of the
existing contract, was signed with DARPA for $6.3 million for the development
and demonstration of a full color, full video rate, 12.1 inch field emission
display for which to date, we received $2.6 million.
We have recognized French income tax benefits of $7.9 million since inception.
These income tax benefits represent tax credits for research and development
activities conducted in France, which are paid in cash to us if it is not
possible to credit them against future income tax liabilities within three
fiscal years. In 1998, we collected $2.8 million, representing R&D tax credits
recorded in 1993 and 1994. In April 1999, we collected $3.0 million from R&D
tax credit recorded in 1995. We collected $1.1 million in June 2000, in relation
with the R&D tax credit recorded in 1996.
In August 9, 1999, we secured a $15.0 million equity-based line of credit with
Kingsbridge Capital Ltd. Under the terms of the equity line, we can draw up to
$15.0 million cash in exchange for our Common Stock, in increments over a
two-year period. The decision to draw on any of the funds and the timing and
account of any such draw are at our sole discretion, subject to certain
conditions. Such conditions include limitations depending on the volume and the
market price of our Common Stock. During the nine-month period ending September
30, 2000, we issued 1,572,261 shares of Common Stock, resulting in $4,321,000 of
net proceeds to us ($4.5 million less issuance costs of $179,000). Through
September 30, 2000, out of the maximum amount of $15.0 million, we have drawn a
total amount of $5.5 million.
13
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
In January 25, 2000, we signed an agreement with Audi and other partners to
jointly design, develop, test and deliver a 7-inches color field emission
display for automotive applications. This agreement is part of the European
Commission IST program. Under the terms of this agreement, the total funding is
approximately $1.7 million, of which $600,000 are expected this year.
In April 2000, we completed a $15.0 million equity private placement with United
Microelectronics Corporation. United Microelectronics Corporation received
9,320,359 million shares of Common Stock at a purchase price of $1.6094 per
share, pursuant to an amendment, signed in February 2000, to the Common Stock
Purchase Agreement dated October 6, 1999 with Unipac.
Cash available as of September 30, 2000 was $21.3 million, compared to $14.7
million as of December 31, 1999. We expect that cash available on September 30,
2000, with the anticipated proceeds from the Kingsbridge equity-based line of
credit, and cash from various grants and loans described above and from R&D tax
credits, will be sufficient to meet our cash requirements, including repayment
of the current portion of our long-term obligations in the amount of $10.7
million on September 30, 2000, for the next twelve months.
We will require substantial funds to conduct research, development and testing,
to develop and expand commercial-scale manufacturing systems and to market any
resulting products. Changes in technology or a growth of sales beyond currently
anticipated levels will also require further investment. Our capital
requirements will depend on many factors, including the rate at which we can
develop our products, the market acceptance of such products, the levels of
promotion and advertising required to launch such products and attain a
competitive position in the marketplace and the response of competitors to our
products. We cannot make assurance that funds for these purposes, whether from
equity or debt financing, or other sources, will be available when needed or on
terms acceptable to us.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk exposure inherent to our international operations creates
potential for losses arising from adverse changes in foreign currency exchange
rates. We are exposed to such foreign currency exchange rate risk in two main
areas: (i) a substantial portion of our operating expenses are, and are expected
to be, denominated in Euros, (ii) most of our capital lease obligations are
expressed in Taiwanese dollars. Fluctuations of the parity of the Taiwanese
dollar versus the Euro or the U.S. dollar may cause significant foreign exchange
gains or losses. In addition, gains and losses arising from the conversion to
U.S. dollars of assets and liabilities denominated in Euros or in Taiwanese
dollars may contribute to fluctuations in our results of operations, which are
reported in U.S. dollars. To date, we have not undertaken hedging transactions
to cover its currency exposure. We are also exposed to interest rate risks in
connection with certain long-term debt. We do not, however, enter into market
sensitive instruments for trading purposes.
14
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
PIXTECH, INC.
PART II Other Information
ITEM 2 Changes in Securities:
During the three-month period ending September 30,
2000 we issued 368,070 shares in connection with the
$15 million Kingsbridge equity line of credit secured
in August 1999, as private placement exempt from
registration under Section 4(2) of the Securities Act.
These 368,070 shares of Common Stock resulted in
proceeds to us of $953,000 ($1,000,000 less issuance
costs of $47,000).
15
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
ITEM 6 Exhibits and reports on Form 8-K:
(a) Exhibits:
--------
27. Financial Data Schedule
---------------------------
(b) Reports on Form 8-K:
-------------------
No reports on Form 8-K were filed during the third
quarter of 2000.
16
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
PIXTECH, INC.
September 30, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIXTECH, INC.
Date: November 10, 2000
BY: /s/ Marie Boem
------------------
Marie Boem,
Principal Financial Officer
17
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
PIXTECH, INC.
September 30, 2000
EXHIBIT INDEX
Exhibit No.
27 Financial Data Schedule
18
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